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Newsline - July 17, 1998


The State Duma passed a large number of laws included in the government's anti-crisis program on 17 July, the final day of an extraordinary session. Deputies passed in all three readings a revised version of the budget code and a law allowing the government to restrict tax breaks and other privileges granted to closed cities, ITAR-TASS reported. The Duma approved in the first reading a law setting up a new procedure for determining electricity and heating fees, which is aimed at reducing the regional discrepancies in those charges, and a law that would make state benefits means-tested (paving the way to cuts in benefits to all but low-income families). On 16 July, the Duma approved final versions of laws to reduce excise duties on oil and cut child benefits to families above a certain income level and also approved a revised version of a law on gambling taxes. LB


During its 17 July session, the Duma rejected several government proposals, including a law that would have nullified all legislation calling for unforeseen expenditures in the 1998 budget, ITAR-TASS reported. Deputies also voted down a proposal to decrease employers' contributions and increase individual contributions to non-budgetary funds, such as the Pension and Social Insurance Funds. A proposal to establish posts for the tax authorities in enterprises that are major taxpayers met with the same fate. On 16 July, the Duma returned to the government a law that would have quadrupled the land tax and voted down a law that would have introduced a 2 percent tax on waste land or land not used for its declared purpose. LB


The Duma on 16 July again voted down a government- backed law introducing a sales tax but later approved a revised version of that law, Russian news agencies reported. The law would allow regional authorities to introduce a sales tax of up to 5 percent. The sales tax would be levied on luxury items such as furs and travel agencies and would not be allowed on essentials such as bread, meat, milk products, and children's goods. Regional authorities would be granted the right to determine which other goods may be subject to sales tax. After the Duma rejected the government's version of the sales tax law and other proposals, Finance Minister Mikhail Zadornov criticized the Duma for not backing "key points" to lead the country out of its economic crisis. LB


Also on 16 July, the Duma passed in the first reading a law revising the income tax scale, but in a substantially different version from the government's draft of that law (see "RFE/RL Newsline," 3 July 1998). Like the government's plan, the new version would retain the 12 percent income tax rate for annual incomes below 20,000 rubles ($3,200) and would reduce the rate on incomes above 100,000 rubles from 35 percent to 30 percent. But whereas the government sought a 20 percent tax rate for all other incomes, the Duma approved a 15 percent rate on annual incomes from 20,000 to 40,000 rubles and a 20 percent rate on incomes between 40,000 rubles and 100,000 rubles. The Duma's draft also would not levy income tax on interest earned from bank deposits that are less than 10 times the minimum monthly wage. LB


Three attempts to pass a version of the land code that had the president's backing failed during the Duma's 16 July session. According to Duma Agriculture Committee Chairman Aleksei Chernyshov, whose committee endorsed the draft, the new code would grant farmers some land ownership rights but would prohibit the purchase and sale of farmland, ITAR-TASS reported. (President Boris Yeltsin previously insisted on giving farmers the right to buy and sell farmland.) Nonetheless, the Communist faction opposed the revised land code. In successive ballots, the code gained 213 votes in favor, then 220 votes, and finally 225 votes--just one short of the majority needed for passage. On 17 July, the Duma decided to postpone further consideration of the land code until its fall session or at an extraordinary session if such a meeting is called during the summer recess. LB


The government on 16 July approved several draft laws aimed at increasing taxes on wealthy citizens. One law would tax automobiles and motorcycles with engines exceeding a certain size. Another would increase the excise duty on high-octane gasoline (which, according to the government, is used primarily by those who own foreign cars). In addition, the government is seeking to impose a 10 percent tax on user costs for pagers and mobile telephones. The new proposals may be intended to counter charges that the government is trying to shift the tax burden from the wealthy to less affluent Russians. The government's anti-crisis program called for lowering the top income tax bracket from 35 percent to 30 percent, introducing a sales tax, and eliminating a reduced rate of value-added tax for many goods. LB


The Duma on 16 July adopted a resolution slamming a telegram sent by Deputy Prime Minister Oleg Sysuev and Pension Fund Chairman Vasilii Barchuk to regional leaders on 6 July, ITAR-TASS reported. The telegram advised regional leaders to pay out pensions at a level below that provided for by federal legislation. The Duma demanded that Sysuev withdraw the telegram and called on regional leaders to strictly follow federal laws on pensions. It also called on Prosecutor-General Yurii Skuratov to monitor closely whether laws on pension payments are violated in the regions. Under a law that took effect on 1 February, pensions are to be recalculated quarterly. But Sysuev recently announced that because of the financial constraints of the Pension Fund, the government wants a temporary reversal of the pension indexing (see "RFE/RL Newsline," 10 and 13 July 1998). LB


"We must end this century, which became an age of blood and lawlessness in Russia, with repentance and peace, regardless of political views, religion, or ethnicity," President Yeltsin said at the reburial ceremony for Nicholas II at the St. Peter and Paul Cathedral in St. Petersburg on 17 July. "For many years we have kept silent about this monstrous crime, but we must tell the truth: the executions in Yekaterinburg formed one of the most shameful pages in our history," he commented. Yeltsin added that the Bolsheviks, who killed the tsar and his family in 1918, were not the only guilty ones but also "those who justified the act for decades." While first secretary of the Sverdlovsk Oblast Communist Party Committee, he authorized the demolition of the building in which the tsar and his family were killed. BT


Russian Orthodox Church Patriarch Aleksii II said that while he respects the "moral motives" behind President Yeltsin's decision to attend the reburial of Nicholas II's remains, the Church's "central act of commemoration and repentance" will be at a monastery outside Moscow on 17 July, Russian news agencies reported. The previous day, shortly after Yeltsin announced his decision to attend, Federation Council Speaker Yegor Stroev backed down from his former position, saying a delegation from the upper house led by St. Petersburg Governor Vladimir Yakovlev will attend the funeral. Communist Party leader Gennadii Zyuganov slammed Yeltsin's decision, accusing the president of fostering a "split in society, including a split among believers." He also claimed that Yeltsin's last-minute decision shows that the president is controlled by his "inner circle." Liberal Democratic Party of Russia leader Vladimir Zhirinovsky supported Yeltsin's decision as a way to "stigmatize regicides," adding that "it was the Communists who were known to have been regicidal." BT


After a 16 July meeting with Yeltsin in the Kremlin, Tomsk Oblast Governor Viktor Kress said the president is sending Deputy Prime Minister Oleg Sysuev to Kemerovo Oblast in the next few days to negotiate with miners blockading the Trans-Siberian Railroad, Russian news agencies reported. Sysuev had said earlier that he will not go until the miners lift the blockade and stop demanding Yeltsin's resignation. Also on 16 July, Kemerovo Governor Aman Tuleev threatened to file suit against the federal government for "failing to meet their commitments to the region's coal miners and public-sector employees." Meanwhile, industrial workers in three towns in Kemerovo Oblast have sent an ultimatum to the Railroads Ministry demanding that trains not be allowed to by-pass the blockade of the Trans-Siberian via the Toguchin-Mezhdurechensk line. BT


The Constitutional Court has rejected an appeal by a journalist against sections of the law on operational-investigative activities, "Kommersant-Daily" reported on 15 July. Irina Chernova, the editor of the Volgograd edition of the weekly "Novaya gazeta," filed the court appeal. As a correspondent for "Komsomolskaya pravda" in 1994 and 1995, Chernova published several articles criticizing the Volgograd police. She was subsequently followed and detained without being told the grounds on which she was being investigated. Police officers also tried to blackmail her by threatening to release pictures or videotapes of her engaged in sexual activities. However, the Constitutional Court found that the disputed articles in the law either were not relevant to Chernova's case or did not violate her rights. LB


Speaking to "Kommersant-Daily," Constitutional Court Judge Anatolii Kononov disagreed with the ruling on Chernova's case. He said the court should have declared all the disputed passages of the law unconstitutional but instead upheld the state's interests over the interests of individual citizens. Among other things, Chernova challenged passages that allow police to keep secret the reasons for opening an investigation and the materials gathered during an investigation. She also disputed an article allowing judges to give permission to conduct investigations without holding hearings or issuing official protocols. LB


The Constitutional Court of the Republic of Bashkortostan ruled on 16 July that President Murtaza Rakhimov's re-election last month was valid, RFE/RL's Moscow bureau reported. The court upheld the decision to reschedule the election from December to June 1998. Rakhimov's critics argued that holding the election six months early violated federal law. They say the election date was changed to allow Rakhimov to run for re-election. He will turn 65 in early 1999, and Bashkortostan's law on presidential elections says presidential candidates may not be within three months of turning 65. The Russian Supreme Court could still declare the Bashkortostan election invalid. It is to consider an appeal from two would- be candidates whose names were kept off the ballot in spite of Russian Supreme Court rulings (see "RFE/RL Newsline," 15 and 23 June 1998). LB


A commentary published in "Nezavisimaya gazeta" on 17 July suggests that the U.S. may be behind Ankara's recent threats to launch air strikes to destroy the S-300 air defense missiles that Russia plans to deliver to Greek Cyprus later this year. The commentator said that Russia's "return to the eastern Mediterranean" poses a threat to the perceived nascent U.S.-Turkey-Israel axis and that Western arms firms may be concerned about losing the Cypriot arms market. Russian Foreign Ministry spokesman Vladimir Rakhmanin told journalists on 14 July that unspecified groups in Turkey are trying to draw other countries into "an anti-Russian campaign" over the proposed deployment of the missiles. But speaking in Yerevan on 15 July, Russian Defense Minister Igor Sergeev called for "normal, friendly" relations between Russia and Turkey in order to promote stability in the region, ITAR- TASS reported. LF


Following the fighting in Gudermes on 14-15 July between a detachment of the Chechen National Guard and forces identified by Chechen official spokesmen as radical Islamists, Aslan Maskhadov issued a decree on 16 July banning Wahhabism in Chechnya, ITAR-TASS reported. Dagestani religious leader Saidmukhamed Abubakarov expressed support for the ban but said he fears Maskhadov delayed too long in taking action against Wahhabis. "Nezavisimaya gazeta" on 17 July argued that the forces opposed to Maskhadov are not Wahhabis but detachments loyal to other Chechen political figures. Maskhadov also disbanded the Islamic special purpose regiment and a subdivision of the Sharia National Security Ministry. The commanders of both those groups had sent units to Gudermes to fight on the side of the alleged Wahhabis, according to ITAR-TASS. LF


Russian President Yeltsin wrote to the Federation Council on 16 July requesting that the mandate of the CIS peacekeeping force deployed along the border between Abkhazia and the rest of Georgia be prolonged, ITAR-TASS reported. The force's mandate expires on 31 July. Yeltsin argued that the peacekeepers are "the only real force that ensures a stable cease-fire and conditions for a political settlement." He added that their withdrawal could "cause an explosion not only in the region but possibly in the whole of the Caucasus." Abkhaz Foreign Minister Sergei Shamba told Interfax on 16 July that if the Russian peacekeepers are withdrawn, Abkhaz units will occupy the 12 kilometer security zone currently patrolled by the Russian force and advance to the Inguri River, which forms the border. LF


A Russian Defense Ministry spokesman told ITAR-TASS on 16 July that leaflets signed by the Georgian guerrilla "White Legion" and containing threats against the peacekeeping force have been found in the 12 kilometer security zone. Also on 16 July, White Legion leaders rejected the accusation by Colonel-General Sergei Korobko, the commander of the peacekeeping force, that the legion planted the land mine that killed five peacekeepers in Abkhazia's Gali Raion on12 July. LF


Eduard Shevardnadze was hospitalized on 16 July for minor surgery, Georgian and Russian agencies reported. Shevardnadze's press secretary, Vakhtang Abashidze, told ITAR-TASS that the 40-minute operation involved destroying a "medium-sized" kidney stone. Abashidze said Shevardnadze "is feeling well, perfect" after the surgery. He denied a Caucasus Press report that the operation was to remove a prostate adenoma. LF


Ramiz Mekhtiev told a press conference in Baku on 16 July that the country's leadership will not meet the remaining conditions laid down by opposition political parties for their participation in the 11 October presidential election, Turan reported. The opposition is demanding that criminal charges against former parliamentary speaker Rasul Guliev and Musavat Party chairman Isa Gambar be dropped and that the opposition be allowed to select half the members of the Central Electoral Commission. Mekhtiev said that six of the 24 seats on that commission have been reserved for nominees from two opposition parties. Mekhtiev added that up to 300 international observers are expected to monitor the poll. LF


The Azerbaijani Embassy in Ankara has issued a statement expressing "dissatisfaction" over former parliamentary speaker Rasul Guliev's presence in Turkey, the "Turkish Daily News" reported on 17 July. The statement said that "Guliev is taking advantage of Turkish hospitality and using Istanbul as a base to harm the friendship between the two countries." In other news, the Azerbaijani Arbitration Court has confiscated assets belonging to the Turkish trade and construction firm DHT, which owes $7 million in taxes dating back to 1995, Turan reported on 16 July. DHT claims it signed contracts with the International and National Banks of Azerbaijan exempting the company from taxes. LF


Turkmen President Saparmurat Niyazov opened a 16 July session of the People's Council by congratulating farmers on this year's grain harvest, which totals 1.24 million tons, Russian media reported. "Nezavisimaya Gazeta" noted that this year's harvest is 20 times larger than during the last years of the Soviet Union. Niyazov also raised the retirement age by two years to 62 for men and 57 for women. He noted that Russia's proposal to repay more than 70 percent of its $107 million debt through goods is "unacceptable," saying Turkmenistan's economy "needs hard currency." And he said that it is time to declare war on drug trafficking, which he called the country's "problem number one." BP


The leaders of 10 political parties, movements, and non-government organizations have appealed to the Constitutional Court asking it to overturn its 13 July decision to allow President Askar Akayev to run again for office. Akayev has been elected in popular votes twice (in 1991 and 1995). The constitution states that one person may serve a maximum of two terms, but the court ruled that since the country adopted a new constitution in 1993, Akayev has been elected only once under current legislation. BP


Kyrgyz police on 16 July arrested 47 people who had staged a demonstration outside the government building in Bishkek since 13 July, RFE/RL correspondents reported. The demonstrators came from the village of Masy in Jalalabad Oblast and were protesting the delay in receiving plots of land from the government. BP


The Kazakh Committee responsible for regulating natural monopolies and ensuring fair competition has begun reviewing tariffs charged by the country's large companies, Interfax reported on 16 July. Committee chairman Nikolai Radostovets told a press conference in Astana that the national oil company, Kazakhoil, has increased the price of oil it supplies to refineries, despite a 17 percent decrease in the price of petroleum on world markets since the beginning of this year. Radostovets said the company "needs to be de-monopolized." Other companies under review are Intergaz Central Asia, Kazakhtransoil, the railroad company Temir Zholy, Kazakhtelekom, and Almaty Power Consolidated. BP


In a resolution adopted on 16 July in Strasbourg, the European Parliament supported the EU Council's 13 July ban on visas for Belarusian senior officials. The resolution calls on President Alyaksandr Lukashenka "to immediately restore the full and unimpeded use of the EU ambassadors' residences in Minsk." It also appeals to the Belarusian government to take the "necessary steps in the process of economic and democratic reform" and to respect human rights. The European parliamentarians also backed the OSCE's efforts in Minsk to promote "the re-establishment of democratic structures" and appealed to the OSCE to provide for "free and fair presidential elections" in Belarus next year. JM


Lukashenka has thanked Russian deputies and senators for not joining the dispute over diplomatic housing at Drazdy, near Minsk. "The West has launched a campaign of vicious attacks on Belarus," Interfax quoted Lukashenka as saying on 16 July. According to the Belarusian president, his opponents "are trying to break Russia's backbone in an attempt to make it put pressure on Belarus." The same day, the Russian State Duma unanimously adopted an appeal to the parliaments of OSCE member countries to revise their policy toward Belarus and engage in a constructive dialogue. The Duma thinks the West's reaction to the Drazdy conflict "is absolutely inadequate to the essence of the issue," while the conflict itself "has been blown up for purely political reasons," Interfax reported. JM


Ukrainian President Leonid Kuchma, visiting Donetsk Oblast on 16 July, said that Ukraine is facing a "severe financial crisis," Ukrainian Television reported. He noted that monthly budget revenues do not exceed 800-900 million hryvni ($400-$450 million), whereas Ukraine's monthly foreign debt obligations amount to 1.8 billion hryvni. Kuchma again appealed to the parliament to pass an amended version of this year's budget that would reduce the annual budget deficit to 2.3 percent of GDP. Such a budget would pave the way for a $2.5 billion loan from the IMF, which "will automatically resolve our problems," Ukrainian Television cited Kuchma as saying. JM


Kuchma also said that the situation of the coal mining industry will not improve as long as the mines do not receive cash payments for their output. He criticized the mines themselves for the barter trade, which, he said,. amounts to as much as 80 percent of business deals at some mines. He also criticized the industry for allotting only one-sixth of its budget subsidies for restructuring and spending the remainder on wages and social benefits. The president also noted a decline in the output of the metallurgical industry and criticized the industry's management for its lack of a "strategic line." JM


Returning from a visit to France, Latvian President Guntis Ulmanis said he believes the OSCE will not require that Latvia make any more changes to its citizenship law, BNS reported on 16 July. He said that during his visit, the opinion was voiced that it would be "unacceptable" to make any more such requirements. "There are no grounds to believe that the OSCE will exert such pressure," he commented. Both Ulmanis and Prime Minister Guntars Krasts have requested assurances from the OSCE that it will cease to require changes in the country's citizenship law. JC


In a surprise move, the parliament on 16 July voted by 101 to one to approve a proposal by President Valdas Adamkus that the lustration law not be enacted until 1 January 1999, BNS reported. Parliamentary chairman Vytautas Landsbergis, who initiated the controversial law, described the president's recent veto of the legislation as "10 times dubious." But Landsbergis called for "granting the president an opportunity to be together" with the parliament over the issue. He added that he is determined not to "fight" with the head of state but to seek to agree on the law. Lawmakers also decided to postpone until the fall any debate on the president's proposal that the parliament turn to the Constitutional Court for a ruling on whether the bill is constitutional. JC


Some 5,000 troops from the Baltic States, Hungary, Poland, the U.S. and western Europe are taking part in training exercises along the Lithuanian coast. Code-named "Baltic Challenge 98," the maneuvers are being coordinated by NATO as part of its Partnership for Peace program. Among those taking part are more than 2,000 U.S. soldiers as well as troops from the Baltic Battalion, whose members are trained specifically for NATO peacekeeping duties. Russian, Belarusian, and Ukrainian observers also reportedly are present. JC


Adam Slomka has resigned as deputy leader of the ruling Solidarity Electoral Action (AWS), PAP reported on 16 July. Slomka is head of the Confederation for an Independent Poland, a junior partner of the AWS. Slomka's resignation follows an agreement on setting up 16 administrative provinces that the AWS and the leftist Democratic Left Alliance has concluded (see "RFE/RL Newsline," 16 July 1998) "This is suicide for [rightist forces]," he commented. In a letter to AWS Chairman Marian Krzaklewski, Slomka argued that the AWS has departed from the fundamental goals of Poland's center-right. Meanwhile, President Aleksander Kwasniewski has announced he will sign the bill providing for 16 provinces. JM


Poland and Ukraine agreed on 16 July to cooperate in fighting prostitution and sex slave trafficking to the West, Reuters reported. "The Mafia has got engaged in [the trafficking of women].... We must take preventive measures together," a Ukrainian Interior Ministry representative commented on the agreement. According to the International Organization for Migration, more than 100,000 Ukrainian women are being forced to work as prostitutes in the West. JM


Social Democratic leader Milos Zeman said on 16 July that President Vaclav Havel accepts his list of proposed cabinet members, CTK reported. Zeman, who made his comments after meeting with Havel, said the president will appoint him as premier on 17 July. Zeman said he could not say that "the president had no objections." He added that it is the president's duty to check on the "suitability" of the cabinet ministers. Havel has said he does not support the appointment of Jan Kavan as foreign minister and Vaclav Grulich as interior minister . The Supreme Court ruled the same day that the daily "Mlada fronta Dnes" must apologize to Kavan for writing that he is persona non grata in Britain, but not for saying that he is "a convicted liar." As a dissident in Britain, Kavan regularly met with a Czechoslovak Secret Service agent but says he was unaware of the agent's identity. PB


The Slovak Foreign Ministry said on 16 July that the ignorance of the international media and Western "double standards" are the reasons why the country has been kept out of EU and NATO accession talks, Reuters reported. Deputy Foreign Minster Jozef Sestak said that Slovakia has been "undervalued" and "systematically hurt" by ignorant foreign media reports. Both the EU and NATO have named Bratislava's poor democratic record as the main reason for not inviting the country to expansion talks. PB


Slovak Prime Minister Vladimir Meciar said on 16 July that he plans to call a referendum on excluding energy utilities from privatization, AFP reported. Meciar said if he is unable to get parliamentary support for such a measure he will start a petition drive to call a referendum on the issue. Opposition deputies say the move is a ploy to deflect attention away from questionable privatization deals already concluded. PB


After meeting with French President Jacques Chirac in Paris on 16 July , Hungarian Prime Minister Viktor Orban said that EU internal reforms are not expected to hinder EU enlargement. In talks with French Prime Minister Lionel Jospin, Orban said Hungary will "not offer areas and industries for colonization but will present economic opportunities" for EU countries. Trade between the two countries totaled nearly $1.7 billion last year, 23 percent more than in 1996, "Napi Gazdasag" reported. Orban also said that joining the EU by 2000 is "ambitious" but "realistic." This was Orban's his first trip abroad as premier. MSZ


Prime Minister Fatos Nano told his national security advisers on 16 July that the international community has not been able to come to grips quickly with the crisis in Kosova and that its failure to act will place a great burden on his government, "at least for the medium- term." He added that the refugees in particular will place a strain on the state budget, Reuters reported. He said that whereas 13,000 refugees are officially registered, the real number of refugees could be as high as 20,000. Nano urged Kosovar leaders to set up a single representative institution and speak with only one voice to the outside world. He warned that their failure to do so would work to the advantage of Yugoslav President Slobodan Milosevic. The prime minister concluded that "all these factors increase the danger to Albania's stability and threaten the work we are doing to rebuild." PM


Some 90 members of the Kosovar shadow-state legislature attended its first session in eight years in Prishtina on 16 July. Deputies took an oath of loyalty to the shadow state and elected a speaker. Police then arrived and told the legislators to hand over any documents and to disperse. The deputies left peacefully, and police took away several boxes of documents. Kosovar President Ibrahim Rugova called the session a success and told Reuters: "we have done it." One legislator added: "it is a very historic day, marking the start of a new free, democratic and independent state of Kosova." Some observers noted, however, that the meeting may prove to be too little, too late, since the government does not represent all political parties and has been steadily losing influence among Kosovars to the Kosova Liberation Army (UCK) in recent months. PM


UN Secretary-General Kofi Annan said on 16 July in New York that the world organization should add 350 soldiers to the current 800 who make up the UN peace-keeping operation in Macedonia (UNPREDEP). He also called for extending UNPREDEP's mandate by another six months, which would be until February 1999. Annan said that the force is stretched too thin to be able to monitor effectively Macedonia's borders with Albania and Yugoslavia. UNPREDEP is the first mission in UN history that seeks to prevent a conflict from spreading rather than keeping the peace in a war-torn area. PM


Some 47 deputies in the 78-member legislature on 16 July approved the new cabinet of Filip Vujanovic, an ally of reformist President Milo Djukanovic. Supporters of pro-Milosevic Yugoslav Prime Minister Momir Bulatovic boycotted the session. Vujanovic promised to promote economic reforms and criticized Milosevic's efforts to curb Montenegro's autonomy. He said that "the destiny of Montenegro and its citizens can be decided only in Montenegro.... We cannot give up Montenegrin statehood, national identity, tradition, and culture." The government represents a coalition of anti-Milosevic parties and includes representatives of the ethnic Albanian minority. PM


Bosnian federal Prime Minister Edhem Bicakcic told RFE/RL's South Slavic Service in a telephone interview on 16 July that refugees are currently returning to many parts of the mainly Muslim and Croatian federation. He added, however, that the number of Croats and Serbs who have returned to Muslim-controlled Sarajevo remains too low. Bicakcic said that a major problem preventing refugees from going home is that the international community has not fulfilled its promises to construct houses and apartments. He singled out the office of the United Nations High Commissioner for Refugees and the European Commission for special criticism. Bicakcic charged that some unnamed foreigners "deliberately find excuses" for delaying promised aid. PM


Vlado Gotovac, the leader of the Liberal Party, told Reuters on 16 July that chances are good that opposition parties will form a coalition and defeat President Franjo Tudjman. "We are trying to find a joint political platform with which we would present ourselves at the elections and a program that we would make sure we fully implement once the elections are over." Gotovac said that the laws governing elections and the media must be changed if Croatia is to become a truly democratic country. He added that there is no chance of reforming that legislation so long as the HDZ remains in power. Observers noted that the failure of the opposition to close ranks has been a major factor in the HDZ's maintaining its grip on power since 1990. Legislative elections are due by October 1999 and a presidential vote in 2002. PM


A drop in the number of foreign tourists may have a significant effect on the government's projected figures for economic growth in 1998, "Vecernji list" reported on 16 July. Two main tourist areas--Istria and Dalmatia -- report declines of 22 percent and 11 percent, respectively, in the number of visitors in the first days of July, compared with the same period in 1997. The crisis in Kosova and the World Cup in France may have prompted some potential visitors not to go to Croatia, but the main reason for the drop is that prices have risen without a corresponding increase in the quality of services. Expanding privatization is the key to reviving tourism, Reuters wrote. Government experts had projected a 15 percent growth in the number of tourists this year. Tourism and remittances from Croatian workers abroad are Croatia's two main traditional sources of hard- currency income. PM


The government on 16 July authorized pyramid-scheme investigator Farudin Arapi to audit the records of another eight investment firms. They include one of Albania's largest companies, namely 2K, which is owned by businessman Koco Kokedhima. Independent legislator Nikolle Lesi recently urged the government to investigate 2K, and he published a series of articles in his daily, "Koha Jone," in which he called 2K a pyramid scheme. Some observers charged that Lesi's motive was to get rid of a competitor. Kokedhima's daily, "Shekulli," lowered its sales price to one-fifth of that of "Koha Jone" in May and quickly tripled its circulation to 17,000. "Koha Jone's" circulation during the same period fell from more than 20,000 to 9,000 copies. Also on 16 July, 70 legislators endorsed Lesi's proposed draft law to ban publishers from selling newspapers below production costs. FS


Romanian President Emil Constantinescu met with his U.S. counterpart, Bill Clinton, in Washington on 16 July and praised the expanding ties between the two countries, an RFE/RL correspondent reported. Talks in the White House focused on bilateral relations, regional cooperation, security in southeastern Europe, and Bucharest's aspirations to join NATO. Clinton said that Romania's general progress has been "very impressive," but he did not elaborate. Constantinescu urged U.S. businesses to expand investments in Romania. He is due to meet with Defense Secretary William Cohen on 17 July. PB


Romanian Prime Minister Radu Vasile requested on 16 July that Privatization Minister Sorin Dimitriu investigate revenue shortfalls from the sale of state assets, Reuters reported. Vasile asked for the investigation after an official report showed that $160 million in revenues are missing from privatization sales. PB


The Moldovan parliament on 16 July passed a more austere 1998 budget but rejected a new tax on bread and milk, Reuters reported. Communist deputies left the chamber before the vote to protest the revised budget, which they called "anti-social." The previous budget, passed before parliamentary elections in March, was based on unrealized projections. Valeriu Muravschi, chairman of the parliament's budget commission, said Moldova needs to accelerate reforms and increase tax collection in order to deal with a "very complicated" economic situation. PB


The Tiraspol City Council said on 15 July that the only secondary school in the city to offer instruction in Romanian will lose its license to operate in November, Infotag reported. Ion Iovchev, the director of the school, said that it is alleged to have broken Transdniester laws on education and "languages spoken in Transdniester." PB


Colonel General Mikho Mikhov, the head of the Bulgarian army's General Staff, announced on 16 July that more than 1,000 officers will be cut from the armed forces, Bulgarian Radio reported. Mikhov said that by 2000 the army will be reduced to 85,000 men, of whom 20,000 will be officers. Mikhov said the planned cuts are being made to conform to NATO standards. In other news, the Interior Ministry said that seven policemen were arrested on 16 July for accepting bribes from international drug traffickers, AP reported. Interior Minister Bogomil Bonev said the policemen will be fired and prosecuted. PB


Operators said that a technical "malfunction" at the Kozloduy nuclear power plant caused radiation levels at the facility to double, AP reported on 16 July. The failure occurred at one of the plant's four older reactors. The Bulgarian government has spent tens of millions of dollars to upgrade the plant in the past several years and rejects calls by the EU to turn off the reactors. PB


by Jan de Weydenthal

Unregulated cross-border trade, once the mainstay of commercial relations between many Central and East European countries, is declining.

That development was perhaps inevitable, given changes in the economies of the region. But it also reflects conscious moves by various governments to introduce stable rules into commercial activities, to tax profits, and to control the flow of currencies between countries.

The result has been a shift toward wholesale, large- scale operations between big companies. This, however, adversely affects the interests of many small businesses and numerous individuals throughout the region.

The apogee of the unleashed cross-border commerce was in the years 1994-1996, following revolutionary upheavals in Eastern Europe and the subsequent dissolution of the Soviet Union.

The activity focused on Poland, the crossing point between the Germans, the Russians, the Lithuanians, the Belarusians, the Ukrainians, the Slovaks, and the Czechs. It led to the establishment of large, mostly private trading centers--the bazaars--on all Polish borders as well as in the country's center.

To illustrate the economic magnitude of this activity, it is sufficient to note that by 1997, the turnover of the 15 largest bazaars reached an officially confirmed figure equivalent to some $2.2 billion, with unofficial estimates putting that figure 25 percent higher.

More than half of the turnover came from the export of Polish-made products. In this way, the bazaar commerce, partly untaxed and unregulated, was a major source of Poland's export earnings. More than 120,000 people were employed last year by the 15 largest bazaars, while hundreds of thousands profited from businesses linked with the commercial activity itself (suppliers, hotels, restaurants, travel companies, and so forth).

According to a recent study by the Polish Institute of Market Research (IBGR), the scope and volume of trade at almost all bazaars have been declining during the last two years. And the institute says this decline is not only likely to continue but will almost certainly accelerate. This assessment is shared by the traders themselves.

The IBGR says that the decline has been prompted by economic changes in Poland and the neighboring countries. The Polish currency, the zloty, has been gradually gaining strength in relation to both the U. S. dollar and the German mark. This strength has also been a factor in the rapidly declining value of the Russian and Belarusian rubles as well as the Ukrainian hryvna. As a result, Polish products have become more and more expensive for the country's eastern neighbors.

At the same time, there has been growing demand for better and more sophisticated products, which can hardly be supplied by small firms catering to traditional bazaar clientele.

The IBGR says that policy decisions by several governments constitute another factor affecting trade. Belarus has introduced a steep duty on imported furniture, for example, while Russia has imposed higher duties on imports of almost all foreign-made products. Poland, meanwhile, enacted a law last year making it more difficult for Easterners to enter the country.

Recent figures on cross-border travel confirm the trend: a 37 percent decline on both the Polish-Russian (Kaliningrad) and the Polish-Belarusian borders. The Lithuanian and Ukrainian crossings have been less affected, but the trend is downward there as well.

The decline in the bazaar commerce has been particularly painful for small businesses and individual traders. They have constituted a large majority of suppliers (the IBGR estimates that about 65 percent of products sold at the bazaars came from small or medium- sized firms).

Public protests have been staged in Poland, Belarus, and the Russian exclave of Kaliningrad this year. But to no avail. The downward trend continues.

By contrast, large scale, tax-paying, and strictly regulated supermarkets and department stores are likely to profit from that trend. Networks of such supermarkets have recently appeared in the eastern parts of Germany, in Poland, and in border regions of the Czech Republic. There is every reason to assume that more will appear. The author is an RFE/RL senior correspondent.